Apple Inc (AAPL) Q3 2025 Earnings Call Highlights: Record Revenue and Strategic AI Investments
Earnings Per Share (EPS): $1.57, up 12% year over year, a June quarter record.
iPhone Revenue: $44.6 billion, up 13% year over year.
Mac Revenue: $8 billion, up 15% year over year.
iPad Revenue: $6.6 billion, down 8% year over year.
Wearables, Home, and Accessories Revenue: $7.4 billion, down 9% year over year.
Services Revenue: $27.4 billion, up 13% year over year, an all-time record.
Gross Margin: 46.5%, down 60 basis points sequentially.
Operating Expenses: $15.5 billion, up 8% year over year.
Net Income: $23.4 billion, a June quarter record.
Operating Cash Flow: $27.9 billion.
Tariff-related Costs: $800 million for the June quarter.
Cash and Marketable Securities: $133 billion.
Shareholder Returns: Over $27 billion returned, including $3.9 billion in dividends and $21 billion in share repurchases.
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Release Date: July 31, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Apple Inc (NASDAQ:AAPL) reported a June quarter revenue record of $94 billion, up 10% year over year.
iPhone revenue grew 13% year over year, driven by the popularity of the iPhone 16 family.
Mac revenue increased by 15% year over year, with strong performance in emerging markets.
Services revenue reached an all-time high of $27.4 billion, up 13% year over year.
Apple Inc (NASDAQ:AAPL) is significantly increasing its investment in AI, embedding it across devices and platforms.
Negative Points
Apple Inc (NASDAQ:AAPL) incurred approximately $800 million in tariff-related costs for the June quarter.
iPad revenue was down 8% year over year due to difficult comparisons with previous product launches.
Wearables, Home, and Accessories revenue decreased by 9% year over year.
The company expects $1.1 billion in tariff-related costs for the September quarter, impacting gross margins.
Operating expenses increased by 8% year over year, reaching $15.5 billion.
Q & A Highlights
Q: On upgrade rates, are the records on iPhone, Mac, and Watch due to strength in upgrade rates or the growing installed base? What makes upgrades particularly compelling this year? A: Timothy Cook, CEO: The records are due to the strength of the products. The iPhone 16 family grew double digits compared to the 15 family, setting an upgrade record. Mac also set records due to the performance of Apple Silicon. There was a pull forward of demand due to tariff discussions, estimated to be about 1 point of the 10 points of growth. A: Kevan Parekh, CFO: CapEx is up due to significant investments in AI and private cloud compute. We have a hybrid strategy, using both third-party and our own investments.
Q: How did the rest of the quarter play out for services, given reports of declining Safari searches? Are Apple products losing strategic value as AI platforms become more valuable? A: Timothy Cook, CEO: Apple products continue to be very valuable. Consumer behaviors are evolving, and we are monitoring them closely.
Q: Can you elaborate on demand in China, particularly for the iPhone 16 and other products? A: Timothy Cook, CEO: We grew 4% in Greater China, driven by iPhone and Mac. Government subsidies affected some products. The installed base hit a record high, and we set an all-time record for iPhone upgraders in Mainland China. The MacBook Air was the top-selling laptop model in China.
Q: What is your confidence in launching a more personalized Siri next year, and how is AI investment progressing? A: Timothy Cook, CEO: We are making good progress on a more personalized Siri and expect to release features next year. Our AI focus is on deeply personal, private, and seamlessly integrated features. We are significantly growing our investment in AI.
Q: Why would revenue growth decelerate to high single digits if services growth remains at 13%? A: Kevan Parekh, CFO: The deceleration is due to the tariff-related pull ahead of demand and the difficult compare from last year's iPad launches. Foreign exchange is a minor tailwind.
Q: How would Apple respond if Google payments were not allowed, given their significance to profitability? A: Timothy Cook, CEO: We don't want to speculate on court rulings and potential responses.
Q: How is Apple preparing for a potential shift away from screen-based devices due to AI developments? A: Timothy Cook, CEO: iPhone's capabilities make it difficult to see a world without it. We are considering complementary devices, not substitutions.
Q: How does Apple plan to offset the $1.1 billion tariff headwind in the September quarter? A: Timothy Cook, CEO: We optimize our supply chain and plan to do more in the US, including a $500 billion investment over four years. We are building chips in Arizona and have other initiatives in place.
Q: Did the Epic case impact services growth, and what does the appeal process look like? A: Kevan Parekh, CFO: We had a strong services quarter with broad-based growth. The Epic decision change was introduced in the June quarter, and we continue to innovate the App Store experience.
Q: How is Apple's supply chain strategy evolving, particularly with production in India and Southeast Asia? A: Timothy Cook, CEO: The majority of iPhones sold in the US are from India, while other products are from Vietnam. We are doing more in the US, including a $500 billion investment and various manufacturing initiatives.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
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